Congressional forecast: Fight over coastal flood protection funds

WASHINGTON -- Now that Hurricane Isaac has passed, a political storm is brewing in Congress over a new effort by coastal lawmakers to secure a larger share of federal royalties from energy production off their shores to fund projects such as flood protection.

But the idea faces opposition from lawmakers who say it would siphon away money needed to help pay Uncle Sam's bills.

Sen. Mary Landrieu (D-La.) stoked the debate by appealing to President Obama during his visit to the storm-battered Gulf Coast earlier this week to support letting states share 37.5% of federal revenues from energy production off their coasts.

Since Hurricane Katrina, Congress has authorized $14.4 billion for flood protection in the New Orleans area, of which $10 billion has been spent to strengthen the levee system around the city. But heavy flooding in outlying parishes from Isaac spotlighted weaknesses in the flood protection system there.

"While the levees surrounding New Orleans performed well, Hurricane Isaac illustrates the fact that flood protection in southeast Louisiana still has a ways to go," Rep. Cedric Richmond (D-La.), who has pushed to increase offshore drilling revenues provided to his state, said recently.

One possible source of new money are the fines expected to be paid by BP from the 2010 oil spill in the Gulf of Mexico; Congress recently voted to steer 80% of the penalties -- up to $21 billion -- to Alabama, Florida, Louisiana, Mississippi and Texas to help restore coastal ecosystems and rebuild economies in the region.

But Landrieu is seeking additional money, from offshore drilling revenues, noting that inland states such as Colorado and Wyoming receive about half of the revenue from drilling on federal land.

"Coastal states should receive a similar allotment so they can engage these funds in flood protection," she said in a letter to Obama.

Her efforts have bipartisan support, including from pro-production lawmakers who see offering financially strapped states a share of drilling revenues as a powerful incentive to build public support for expanded offshore energy exploration that would reduce U.S. dependence on foreign oil.

Under 2006 legislation, Alabama, Louisiana, Mississippi and Texas are due to receive a chunk of federal revenues from new areas of the gulf opened to drilling, up to a collective $500 million a year, but much of the money isn't expected to arrive for several more years. Coastal states also receive a share of federal revenues from offshore drilling close to the three-mile limit on state waters.

Federal offshore drilling royalties were reported at about $6.5 billion in fiscal 2011. Uncle Sam is projected to receive about $47.7 billion from offshore drilling over the next five years, according to one congressional estimate.

But the so-called revenue sharing has drawn opposition from Sen. Jeff Bingaman (D-N.M.), chairman of the Senate Energy and Natural Resources Committee who has long contended that federal waters are a national resource that belong to all Americans.

Agreeing with him, Rep. Edward Markey (D-Mass.) said during a House debate earlier this year: "These are resources that should help every American, not just a select few .... We need this revenue to reduce our deficit and to get our fiscal house in order."